The goals of the taxpayer-propped private health system are under question threatened as insurer empires expand

Plans by the country’s private health insurers to become health providers as well as funders is under fresh scrutiny as the shaky viability of private hospitals sparks calls for a fundamental review of the sector.

Bupa APAC chief executive Nick Stone.

Extensive plans by the country’s private health insurers to transform the health system by becoming health providers as well as funders is under fresh scrutiny as the shaky viability of private hospitals sparks calls for a fundamental review of the sector.

The expansion of some of the nation’s biggest health funds into primary care is prompting fears that health insurers owning GP clinics would further “cannibalise” the GP workforce and lead to a two-tiered health system.

British multinational Bupa has cast its move to acquire scores of primary healthcare centres across Australia as a central part of its “its vision for the future of healthcare” as insurers increasingly turn their focus to becoming frontline providers of preventive care and cost-efficient out-hospital care. They say that becoming providers as well as funders of healthcare is central to future-proofing the health system as the country faces a tide of chronic disease and an ageing population that will pose a massive burden to health and consumer budgets.

“The real aim is providing more choice for our customers to drive innovation in these new, more efficient care models that drive better experiences for patients – and, importantly, doctors – that is going to help maintain long term affordability, but also help sustain the system,” said Medibank chief executive David Koczkar of the insurer’s longstanding and expanding push into healthcare delivery.

But doctors and hospital groups are questioning the rapid expansion of vertical integration in healthcare – where insurers take fund or have ownership in some way in healthcare service delivery – amid a federal government review of the viability of the private hospital sector that has highlighted the danger of market trends that may leave full-service private hospitals saddled with undertaking the most complex care amid big questions as to how such expensive care would be funded.

Private hospital profits plummeted during Covid and structural and demographic shifts, as well as changing healthcare delivery, are now making it difficult for many operators to bounce back. Ramsay Healthcare, the biggest operator of private hospitals in the country, is the best off but even it has taken big hits to its profitability.

As the federal government pores over the books of private hospitals during its review, Ramsay Healthcare chief executive Carmel Monaghan has sounded a warning over market trends that she says threaten to further destabilising the system and fragment the delivery of healthcare.

She said private hospital innovation in technology, clinical practice and shifts to lower-cost care settings such as home care were being hampered by insurers refusing to fund these initiatives. Many were moving instead to set up their own vertically integrated out-of-hospital care.

“Overnight hospitals and doctors get efficiencies through doctors being able to deliver care to more complex, sicker and more vulnerable patients alongside their less complex patients,” Ms Monaghan said.

“Siphoning these less complex patients away from acute hospitals would just create inefficiencies and also leave these hospitals with higher costs. Overnight acute hospitals will get far more expensive, ultimately making care inaccessible for the oldest and sickest population.”

Ramsay has joined the Australian Medical Association and Australian Orthopaedic Association in calling for regulation around vertically integrated healthcare to ensure insurers cannot interfere in clinical decision making.

Ms Monaghan also said health funds buying up GP clinics should be a line in the sand when the sector was already on its knees and a severe workforce shortage was looming.

“Insurers should never have been allowed to own general practice – this is not good for consumers. It will lead to a two tiered healthcare system where the treatment of private insured patients seeking general practice could cannibalise available practitioners for non-insured patients,” she said.

“In addition, if insurers have more information on patients it could further undermine our community rating system and lead to clinical interference in decision-making.

“General practice should have been protected and I think governments have failed Australia in that regard.”